EXHIBIT 99.2
CORVEL CORPORATION
EXCERPTS FROM
ANNUAL EARNINGS CONFERENCE CALL
MAY 8, 2003
DATE OF TRANSCRIPTION: MAY 12, 2003
Operator: CorVel wishes to caution you that these statements are only
projections and that actual events or results may differ
materially. CorVel refers you to the documents the Company
files from time to time with the Securities and Exchange
Commission, specifically the Company's last Form 10-K and 10-Q
filed for the most recent fiscal year and quarter. These
documents contain and identify important factors that could
cause the actual results to differ materially from those
contained in our projections or forward-looking statements. At
this time, all participants are in a listen-only mode. A
question-and-answer session will be conducted later in the
call with instructions being given at that time. As a
reminder, this conference call is being recorded. I would now
like to turn the conference over to our host, Mr. Gordon
Clemons. Please go ahead, sir.
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Gordon Clemons: First, I'd like to summarize briefly the quarter and then I'll
come back to details in each of the segments. In the quarter
we had $74 million in revenue, up about 22% from the same
quarter the prior year. Annual revenue was $283 million, up
about 20% from the prior year. Earnings per share is up 15% in
the quarter and 15% in the fiscal year.
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On the business results side, the patient management revenues
increased about 11% from the prior year relative.
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The provider programs, or PPO and network management area, was
up 32% for the year, certainly a strong year for us. Patient
management profits were up 20% though from a weak level a year
ago, and the provider program profits were up 17% reflecting
some of the mix changed in that business as we enter some new
segments that do have lower margins. The issues in the product
lines I'd say on the patient management side improvement was
largely due to market share gains as the unit volumes per
customer were probably down in the year, although we don't
track that very effectively I would say. Pricing has improved
but remains too low and is certainly a problem for us as a
business, although I think it's really just a symptom of the
fact that we haven't properly differentiated this product.
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We've talked in the past a little bit about cash flow, and
I'll just run through some of those numbers briefly for you.
In the year, EBITDA was a little over $37 million, up from $32
million the prior year. Cash flow, defined as net income plus
depreciation, was up to $27 million from $23 million. We had a
good year in managing our working capital, so a lot of that
flowed through into cash for the business; although in the
most recent quarter our accounts receivable outstanding
deteriorated a little bit, and we'll be working on that to
keep it down. It's still at a good level, but it was up a
little more than we'd like. We've had a lot, as I mentioned,
of new things going on in our field operation that is taxing
for them. Cash was around $6 million at the end of the
quarter. Interest income, which we used to talk about a little
bit, is as you can appreciate negligible these days. We don't
have much cash and nobody pays us much to have it.
Stock repurchases in the quarter were around $4 million. We
dropped shares outstanding about 81,000. Hard shares were
10,625,000 and weighted shares were 10,951,000, so we've
dropped that below the 11 million mark -- which was one of our
milestones we were pointing to -- up to about 5.2 million
shares that were repurchased since we began that program in
1997.
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At that point, I'd like to conclude my prepared remarks and
open this up to questions from people on the call, Sherette,
if you'll take over at this point.
Operator: Ladies and gentlemen, we will now begin the
question-and-answer session.
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Richard Glass: Nice quarter. Do you want to give us the breakdown in terms of
the margins between divisions and what's going on there in
terms of the changes as well?
Gordon Clemons: Yes. The revenues in the patient management segment were about
$33.4 million in the quarter, which was a little above our
expectations. It was up 4.5% sequentially year over year, up
11.3%. The margins there were 10.4%, which was down slightly
from the prior quarter and down from a little higher level a
year ago. I think the economy affected that area, but
nonetheless it continues to improve a little bit for us and
year over year certainly is contributing more to profits than
it was. Provider programs we did $40.6 million, which was
actually down 1% from the prior quarter which was
exceptionally strong -- we had some year-end work that we did
for a couple of people -- but nonetheless was up 32% from the
prior year, and the profits were up 17.4% from the prior year.
It ran around 24% field profit margin in the quarter, which
has been blended down by some new services from the numbers
that were closer to 30% maybe three years ago, but nonetheless
I'd say that the individual components of that are still
running similar margins and that area remains kind of the core
of our business. So those are I think the two segments that we
break out.
Richard Glass: Okay. Can you, just for clarification, you bought back 81,000
shares for $4 million?
Gordon Clemons: No, no.
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I think we reduced the weighted shares by 81,000.
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We repurchased 122,000 shares in the quarter at an average
price of $33.40, for $4,067,000. So that netted down -- we
have some options exercising every quarter, so there's always
some netting down -- and then of course the weighting changes
based on the price, although the price in the marketplace has
been pretty flat.
Richard Glass: Okay. And what was the SG&A? What did that look like?
Gordon Clemons: The SG&A was pretty much dead flat with the prior quarter at
$6,275,000, which is 8.5% of revenue. We historically have
wanted to keep that near 8%. We ran a little higher this last
year as we had some strong operations, and we continue to be
investing in software at a little higher pace than we had
been.
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Richard Glass: Okay. Can you give us a little more color on these direct care
networks that you said are included? Have they not been
included at all, or are you just kind of highlighting them
now? And is that lower margin business or is that better
business? Can you give us some insight there?
Gordon Clemons: Yes, the directed care networks run lower margins and are new
to CorVel. We've been in some small segments of that over the
years, but they are growing in popularity in our marketplace.
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Richard Glass: Okay. And can you tell us what the numbers were in the DSOs?
Gordon Clemons: Well, the DSO was around 55 days I think, maybe a little over
that, and was up from the mid-53's at the end of the year.
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Operator: This concludes our conference call for today. Thank you for
your participation. Please disconnect at this time.